State auditor claims Estonian Concert broke law
08.09.2010, 10:40After auditing the accounting and transactions of public sector organizations in 2009, State Audit Office says that the one of the largest violations that it detected from auditing the books is the renovation of St. John's church in St. Petersburg by Estonian Concert, writes Äripäev.
Ines Metsalu, chief state auditor, said that, among others, Estonian Concert may have violated the State Budget Act and the Public Procurement Act. For instance, Estonian Concert signed a construction contract whose total value exceeds 50% of the investment budget for 2008 and the government had not approved the exceeding of the limit.
Moreover, since the contract included financing cost, it is also a violation of the State Budget Act that prohibits public sector enterprises to borrow.
Another accusation is that Estonian Concert signed an amendment to the procurement contract, but it was not based on changing of objective circumstances that the tendered was unable to foresee at the time of entering the procurement contract.
State Audit Office also criticised the project funding. While state budget funds were sufficient for financing only phase 1 works, Estonian Concert, Facio Ehitus as contractor and DnB NORD Pank and LHV Pank as financiers signed a contract by which the two banks became the owner of Facio Ehitus 60 million kroon claim against Estonian Concert. Under the contract, Estonian Concert will repay the banks 60 million plus 20 million kroons in interest. According to state auditors, the contract's interest rate is 9.5% at the time when the state could have borrowed from banks at 4.2%.
Aivar Mäe, former head of Estonian Concert who is managing the church renovation project, commented the accusations by saying that real life is different, especially in Russia. In his opinion, the construction market and laws of Russia and Estonia cannot be compared.
"If we had stopped the construction midway we would have lost more than these 20 million kroons. Borrowing was the right thing to do and who's to say that it was a loss. Perhaps in the long run will be a victory?" asked Mäe.